WORLDS CALE 500 480 460 410 420 400 380 360 340 320 300 280 200 240 220 200 TABLE 23 COMPARISON OF SINGLE VOYAGE FREIGHT INDEX (BASE JANUARY 1967 100) FOR DRY CARGO DECEMBER 1975 DRY CARGO INDEX TANKER RATES DRY CARGO 180 160 140 120 100 '80 GO 40 20 JFMAN J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D JPM AM J J A S O N D JY NAM J J A S C. (3) Did freight rate increases in 1974 and early 1975 conform to the predictions for that period? (Analyze this by trade route, commodity, nation, and ship type.) The Panama Canal Company does not have this information available. C. (4) State the Canal organization's understanding of the relationship between freight rate increases and the profitability of a particular trade route. Does the Canal organization have an estimate of the minimum level of profit desired by vessel operators whose vessels transit the Canal? The Panama Canal Company does not have this information available. D. PORT ACTIVITY (1) State the percentage of vessels in each of several selected major U.S. and foreign ports which transit the Canal. State the volume and proportion of cargo in and out of those major ports which transits the Canal. Calculations of vessel traffic and cargo volume in major U.S. and foreign ports is not within Panama Canal capability. D. (2) State the total number of jobs at major U.S. and foreign ports which the Canal organization believes will be significantly affected by the measurement rules change. Panama Canal cargo volume originating in or destined for the United States constitutes only a small percentage of total U.S. seaborn trade.2 This small percentage in turn is rather widely shared among numerous ports and thus, any effects resulting from vessel or cargo decline would also be subject to this 2 Based on statistics appearing in the United Nations Statistical Yearbook, 1974, (New York: United Nations, 1975) Table 157, p. 148 and on Panama Canal cargo statistics, this figure in 1973 was 12 percent. diffusion. Furthermore, analyses of the effects of toll increases on U.S. exports show no identifiable loss of U.S. sales abroad.3 As pointed out in the sections on unemployment, Gross National Product and Balance of Payments, several studies have concluded that tolls increases would have no significant effects on the U.S. economy.4 In regard to U.S. regional economies IRA states that "no disruptive effects on U.S. industries were identified in connection with the range of toll rate increases covered." 5 D. (3) State the total number of jobs in these ports which could be affected by a closure of the Canal or tolls increases of several hundred percent. Conclusions are as stated in D (2). E. UNEMPLOYMENT (1) In addition to the numbers of jobs which could be jeopardized in the ports estimate the number of jobs related to production of commodities shipped from those ports through the Canal, and indicate which of those jobs might be jeopardized by the proposed measurement rules. (2) Estimate the unemployment which might result on the Isthmus of Panama from either implementation of the proposed rules or failure to implement them. (3) By a calculation of the unemployment data derived, estimate the overall employment effect of the measure on (a) the United States; (b) Panama; and, (c) other countries of the world. In the United States, the level of employment is determined independently of Canal toll rates. "In other words, it is assumed that a change in toll rates would not cause any change in the levels of employment actually achieved in the United States over the years." Any tendency to stimulate or depress employment "would mix with tendencies from other sources, and because of the need to maintain a balance of forces in the economy, any net tendency to overstimulate or unduly depress would be offset by monetary, fiscal or other policy measure designed to influence the level of employment. Therefore, any tendency arising from a change in Canal tolls would have no effect on the end result achieved with respect to employment." 7 As pointed out in the study by James Howell and Ezra Solomon, "it is manifest that PCC revenue policies cannot be an instrument of general economic policy for the U.S. as far as domestic economic objectives are concerned simply because the magnitudes are so small. This conclusion includes impacts on domestic U.S. employment, whether national or regional, since again changes in PCC policies would not have any significant impact on a civilian labor force of over 90 million persons." 8 Even on the smaller figure of unemployment, the authors point out the impact would be trivial.9 Furthermore, "these conclusions apply not only to initial first round effects but also to secondary effects through local industries and local labor markets" and "easy verification can be made by comparing probable changes in traffic or particular commodities to and from the United States with actual production as reported in standard government publications." " 10 In regards to effects on U.S. regional employment levels the IRA study points out that "for a toll increase to have a negative effect on regional employment 3 International Research Associates. Panama Canal Toll Rate Increases: Effects on the U.S. Economy. (Palo Alto; California: International Research Associates, undated) p. 4-2. Panama Canal Toll Rate Increases: Effects on the U.S. Economy and The Economic Valu. of the Panama Canal. 5 Op.cit. p. 4-2. • International Research Associates, Panama Canal Toll Rate Increases: Effects on the U.S. Economy. (Palo Alto, California: International Research Associates, undated) p. 4-2. 7 IBID. p. 4-2. 8 Howell, James E. and Ezra Solomon. The Economic Value of the Panama Canal. (Palo Alto, California: International Research Associates, 1973) p. 35. IBID. p. 35. 10 IBID. p. 35. TABLE 19-MAJOR CANAL COMMODITIES BY FLAG 1-OCEANGOING COMMERCIAL, FISCAL YEAR 1975 179 35 76 25 57 3 levels, it would necessarily have to result in a sufficient effect on one or more industries in such areas as to cause those industries to reduce the number of workers employed." 11 In the IRA study, "no disruptive effects on U.S. industries were identified in connection with the range of toll rate increases considered." 99 12 The implementation or non-implementation of the new admeasurement rules will not effect the level of employment on the Isthmus of Panama. Employment in the Canal enterprise is based on the minimum requirements to adequately provide required services. At such times that revenues do not recover all essential expenses, including minimum personnel costs, it is necessary to seek rate relief. Of course, revenues accruing from the admeasurement rules changes would reduce the magnitude of any required tolls increase. F. CONSUMER WELFARE Based on the analysis of those commodities most likely affected by a price increase, indicate the inflationary effect in the U.S. and in the world of price increases resulting from the proposed changes in measurement rules. In order to determine the effect of toll increases on prices in the United States, it is necessary to ascertain who would bear the added costs of paying the higher tolls or of some alternative choice and whether the increased costs would be paid from U.S. or foreign sources. "In all cases, it is the buyers and sellers of the commodities who pay the tolls or other costs, and they may or may not be able to pass on the costs to others in the chain between production and consumption." 13 "For a specific U.S. industry to be strongly affected by higher toll rates, it would have to be in a market situation that requires the specific industry to absorb a large amount of the added costs. Most of the commodities imported by the United States via the Panama Canal are raw materials or intermediate goods that pass through one or more further transactions between business firms before appearing in final products. It is believed likely that any cost increases arising from higher toll increases would be rather widely shared rather than concentrated on specific industries. For final products, the effect of these cost increases would be very slight in relation to total product costs, which would also promote the diffusion of effects. No U.S. industry was identified in this study as subject to disruptive effects from higher costs of imports arising from the range of toll rate increases considered. For U.S. exports, it is estimated that the burden would be borne almost entirely by foreigners with no identifiable loss of U.S. sales abroad." 14 In summary, both sources quoted provide evidence that a Panama Canal tolls increase would have no discernible effects on the overall economy of the United States, and thus a tolls increase would not result in an increase in the level of inflation. G. GROSS NATIONAL PRODUCT Calculate the effect of the proposed rules on Gross National Product of the United States due to: (1) Increase or decrease of Canal transits. (2) Costs or benefits accruing to the U.S. from use of alternative routing if goods are sensitive to measurement rules change. (3) Losses of export income of the United States as a result of changes in trade resulting from measurement rules change. (4) A change in toll payments by non-U.S. sources. (5) The changes in factors of employment and prices in the United States resulting from the measurement rules changes. An analysis of the relationship of Panama Canal tolls and the U.S. real GNP performed by the International Research Associates revealed that increased 11 Op.cit. p. 4-13. 12 IBID. p. 4-13. 13 IBID. p. 3-17. 14 IBID. p. 4-13. |